The question of maintaining oversea commerce received the prompt attention of the Government. Many people connected with the shipping industry had fully expected that the outbreak of war would find a large number of fast German cruisers at large and ready to prey upon British commerce. Shipowners had themselves made certain provisions, but only of very limited scope. They had formed certain mutual clubs in which ships were to be insured against war risks only until their arrival in safety in British or neutral ports. This arrangement would obviously not have had the effect of keeping ships at sea and maintaining oversea commerce as in peace times, which, in the Chancellor's opinion, was a vital necessity. The recommendations of the sub-Committee of the Committee of Imperial Defence were therefore put into operation at once. The proposals dealt separately with hulls and with cargoes. The State undertook to accept re-insurances from the clubs on ships up to 80 per cent. of the values, receiving in exchange 80 per cent. of the premiums. At first rates of 1¼ and 2½ per cent. were quoted for the single and double voyages respectively, but these after a few weeks were reduced to 1 and 2 per cent. Similarly a premium for a three months' time policy was reduced from 40s. to 30s. per cent.
The recommendation of the sub-committee respecting cargoes was, briefly, that the State should undertake to insure merchandise in British vessels at premiums which should not be below 1 guinea per cent. and should not rise above 5 guineas per cent. A special office was established at the Cannon Street Hotel and began to transact business on the afternoon of Wednesday, August 5. At first the maximum rate of 5 guineas per cent. was quoted; three days later the rate was reduced to 4 guineas per cent., and it was again reduced within short periods, until on September 1 it stood at 2 guineas per cent. At that level the rate remained until the last day of the year, when it was reduced to 1 guinea per cent.
All this time underwriters and insurance companies had been transacting a very large business at rates which were as a rule below the Government quotation. The Government scheme only applied to cargoes in British vessels, and then only to British vessels which were insured against war risks with associations approved by the Government. The State Office also would not insure vessels which had already left port. A large field was therefore left open to private enterprise, apart from the business which naturally flows to the cheapest market. For several months an enormous business was written on cargo across the Atlantic at only 5s. per cent., which compared with the Government quotation of 1 per cent. Coasting and other short voyages were also written at rates substantially below the Government quotation. It is understood that for the first six months, at any rate, underwriters had no reason to regret their operations in war insurance. Marine casualties were comparatively light and the year for marine underwriters may be regarded as an exceptionally good one.
The magnitude of oversea commerce may in the circumstances be regarded as highly satisfactory. For the twelve months imports showed a decline of 9.2 per cent.; exports of the produce and manufactures of the United Kingdom a fall of 18 per cent.; and re-exports of foreign and colonial merchandise a drop of 12.8 per cent. If the figures of the last five months alone be taken into account the imports declined by 20 per cent., the exports by 41 per cent., and the re-exports by 32.7 per cent. It should be remembered that the export trade was diminished by the embargo placed on many products, and also that the figures do not show the merchandise exported for the use of the Army and Navy. Taking the import and export trade the total values amounted to 1,223,000,000l., a decrease for the year of 180,000,000l.
All the railways of the country were taken over by the Government on the outbreak of war under powers conferred by the Regulation of Forces Act of 1871, the administration being placed in the hands of an executive committee of railway managers with the President of the Board of Trade as chairman. In return for the immensely important services rendered by the companies in conveying troops and stores throughout the country the Government agreed, if the receipts for 1914 were less than those for 1913, to pay such sums as, together with the net receipts, should bring them up to the level of 1913. On the other hand, if the receipts for the first half of 1914 were below those for the corresponding period, the amount to be paid by the Government was to be reduced accordingly.
Prices of foodstuffs, including wheat, generally were advanced considerably at first, but declined when trade settled down into more normal conditions and on the regulation of retail prices by boards representative of the different trades which were appointed by the Government. Towards the end of the year prices again advanced, and in many cases closed at the highest points touched. One of the most interesting of the many measures taken by the Government in financial and commercial spheres was the purchase of sugar to replace the million tons of beet sugar which would normally have been imported from Germany and Austria. Roughly, about 900,000 tons were bought for refining and manufacturing purposes and for direct consumption, and, though the Government plan was criticised on the ground inter alia that high prices were paid, it has been widely recognised that but for the prompt action it would have been difficult to obtain adequate supplies, except from tainted sources. A Royal Commission was appointed to determine the selling prices, and a prohibition was placed on importation of all sugars, in order to prevent supplies reaching here from enemy countries through neutrals and indirect payments in return through similar channels. Evidence that Germany was receiving tea through neutral countries led in November to the prohibition of exports from this country, the action being similar to that previously taken in the case of rubber.
Life assurance companies were deeply affected by the war. As a result of joint deliberations they resolved to make no additional charge for war risks to all their policy-holders who had, as civilians, assured and have joined the Active Forces. For new policies it was at first decided to charge an additional rate of 7l. 7s. per cent. This rate was based on the experience of the South African War, but it proved inadequate for the risks of the Continental fighting. Gradually offices began to raise the extra rate, and by the end of the year some were quoting 12l. 12s. per cent. or even more, or were declining to write the business at all. A suggestion that the Government should assume the war risk did not meet with the approval of the Treasury, since it was considered that the Government was doing all that could be expected of it by increasing the payments to widows and other dependants of those who fell in the war.
The most urgent problem facing life offices was that of the heavy depreciation in their securities. This matter is being dealt with by the offices according to their individual views, but it is interesting to note that permission was given to them by the Board of Trade to show in their certificates the prices current as on December 31, 1913. Immense sums have been written off by the Banks for depreciation, and the policy of persistently feeding the reserves in past years will now stand all the great financial institutions in good stead.
Cuthbert Maughan.